Currency exchange is too costly, says Consumer Focus

Currency UK travellers spent £27bn while on holiday overseas in 2009, the watchdog says

Complex charges and misleading information means UK holidaymakers are paying too much for foreign currency, a watchdog has said.

Consumer Focus said it was unclear how much of the estimated £1bn a year charged in currency exchange fees was warranted.

It has submitted a super-complaint to the Office of Fair Trading (OFT).

But the banking industry said it was disappointed that Consumer Focus took such a step before talking to banks.


The watchdog's complaint claimed that converting £500 into euros could cost between £10 and £30, even though the service provided was essentially the same.

It has also raised questions about charges when using credit or debit cards overseas.

The areas of concern it has raised include:

  • Complex card charges that prevent holidaymakers shopping around for a better deal
  • Charges for buying currency in the UK with a card failing to reflect the costs of processing the payment
  • Hidden mark-ups that make marketing phrases such as "0% commission" misleading

With an estimated £10bn taken in cash by UK holidaymakers travelling overseas every year, the watchdog wants the OFT to ensure consumers are being treated fairly.

What is a super-complaint?

A designated consumer group can make a super-complaint to the Office of Fair Trading (OFT) if an issue is "significantly harming the interests of consumers".

The OFT has 90 days to respond by stating what action, if any, it plans to take on the issue and the reasons behind its decision.

"Individuals buy holiday money infrequently and so may not shop around much or may just stick with the same supplier," said Mike O'Connor, chief executive of Consumer Focus.

"A cocktail of confusing charges and poor transparency means collectively we are losing out in a big way."

The watchdog is calling for a simplification of charging structures for using cards overseas, cash withdrawal fees for UK transactions to reflect the costs of processing, and clearer explanations of exchange rates after all fees are added.


The widest variation in charges come with debit card charges, according to Andrew Hagger, of consumer website Moneynet.

But the banks said they were disappointed that the watchdog failed to engage with the industry before submitting the complaint, which they would now scrutinise.

"Competition in the holiday money market is not simply between High Street banks; it also involves companies which do not usually provide financial services," said a spokesman for the British Bankers' Association, which represents the major banks.

"The report acknowledges only 15% of holidaymakers get their foreign currency from a bank.

"Any analysis of this market needs to take full account of the costs to businesses of providing these services - for instance, the cost charged by foreign ATM providers every time a UK card is used.

"Transaction costs abroad are driven by the costs of overseas payment systems, often in countries where free banking does not exist."

Melanie Johnson, who chairs the UK Cards Association, said: "The Consumer Focus super-complaint, covers a broad spectrum of issues - not all related to cards by any means. We will now be going through their report in some detail to check the facts.

"Customers increasingly choose to use their cards abroad because they are convenient, secure and flexible and offer greater protection than other types of payment. Despite the fact that providing this service comes at a cost they are often the most competitive option."

The OFT has 90 days to respond to the super-complaint by stating what action, if any, it plans to take on the issue and the reasons behind its decision.

The OFT said it would provide a response on or before 20 December.


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  • rate this

    Comment number 222.

    I work abroad most of the time. The currency exchange in the UK is a rip-off. I always look at the difference between the sell rate and buy rate and consider that as the commission regardless of the 0% bit. Post-office are the worst.

    So I stopped getting any in the uk and just used cash-points but they've gradually ramped the comm and fees (diff?) so it is abt 5% against the inter-bank rate

  • rate this

    Comment number 219.

    I recently went ot an all-inclusive resort in the Dominican Republic. I took a few US dollars with me but needed more whilst out there - The Buerau de Change made me buy Dominican Pesos using UK Sterling and then with these Pesos I could buy US dollars! And yes there was commission on both transactions!

  • rate this

    Comment number 217.

    Some people are suggesting taking cash abroad then exchanging there to get the best deal. Well just recently I tried exchanging 850 Danish Krone to euros in Italy (worth about 114 euro at spot rate) and was offered just over 81 euros for the cash. On return to UK I got over £93 for the same. So poor advice.

  • rate this

    Comment number 181.

    I find it hard to believe how stupid some people appear to be!

    I'm sorry, but I don't go abroad that much (one trip annually), I don't think it is at all confusing, maybe a bit of a rip-off but if you bother to look at what you are getting it is easy enough to work out.

    The problem is most people just don't bother to check things out fully, and then blame others for their own laziness

  • rate this

    Comment number 170.

    I recently went on holiday to Turkey. By a simple bit of internet research I determined that the best thing to do was to take a minimal amount of currency with me and exchange £ locally. Really not too complicated!
    Sometimes I wonder whether we have turned into a nation of utter whingers who expect someone to spoon-feed then everything and to take no responsibility for making personal decisions


Comments 5 of 13


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